How transparent should small business owners be with company finances? Learn what to share and, most importantly, what not to share.
“You should never give raw financials because they wouldn't make sense.” - Wayne Rivers
Today, Wayne Rivers is widely considered a small business expert. He is the president of The Family Business Institute, which he started nearly two decades ago. Back then, he was in the same shoes as many of his current clients: an entrepreneur just trying to get his company off the ground. Part of that challenge was knowing what behind-the-scenes financials to share with his team.
“We didn't share in the beginning,” says Rivers. “But as we opened the culture, I wanted my employees to buy in, to share the same dreams that I have. It's a piece of it.”
The Family Business Institute boasts 10 employees and clients today, who make from $10 million to $2 billion in sales. And part of Rivers's savvy in growing his business, he says, was keeping employees in the financial know, increasing the company's cohesion.
“Its consistent with business planning—sharing 1-, 3-, and 5-year goals,” he believes. “It's a big part of making a participative culture vs. a patriarchal culture.”
Here are some guidelines for finding that sharing balance and, in turn, getting your employees to care about your company's financials.
Put Yourself in Your Employee's Shoes
The primary goal you want to accomplish is to demonstrate that your company is stable and an organization of substance,” says Barry Sloane, CEO of the Small Business Authority and Newtek Business Services. A successful company should use its financial strength to engender confidence.
“If you were a business making a lot of money you may want to show that, the bad part is it could make negotiations with your employees difficult,” says Sloane.
Also avoid sharing salaries, as that could lead to personnel drama and jealousy. Of course, keep proprietary dealings under wraps until contracts allow for it.
“Budget is not something you would necessarily share, nor is the income statement essential,” says Sloane. “Balance sheet and equity capital are more important.”
Balance sheets and equity statements show assets, capital, investments and other factors that allow you to depict stability and strength.
Communicate to your employees the relationship between the current finances and the company's future success.
“You want your workers to understand employee input, profits and compensation are a direct causal connection,” says Rivers. So let them know about business plans down the line and company's goals, short or long term.
Present Data in a Friendly Format
Remember, not all of your employees may have a head for numbers, or even care to hear the nitty gritty financials. Think big picture.
“You should never give raw financials because they wouldn't make sense,” says Rivers. “Its just gobbledygook unless they are accountants. You should present information in digest or summary format.”
Rivers suggests taking out extraneous line items such as the amount you spend on coffee a year. “Use percentages, bar graphs and pie charts,” Rivers advises if not to help get the message across, then perhaps away to avoid sharing exact digits.
Learn How to Say No
Consistency is key when employees ask to see more than you think they should.
Make the amount of financial information you routinely share standard.That way, when someone ask uncomfortable questions beyond the mold, you have the leverage to use a line suggested by Sloane.
“Tell them this is historically what we've made available and all that is available,” says Sloane.
But that does not mean you should discourage all prying questions, just the ones you are uncomfortable answering.
“If people have questions that's wonderful. It means they're engaged,” says Rivers.
The road to getting employees to care about company financials (the way you want) is long. “It takes years, not weeks, not months but years,” says Rivers.